Cyprus: Country and Foreign Investment
Cyprus has an excellent business infrastructure with good telecommunications; this, together with the widespread use of the English language and a legal system largely based on English law, makes the island a very convenient and effective business base.
Nicosia, the capital and chief administrative centre, is also the main city for business, although Limassol, with its port, and Larnaca, with the main airport, are also significant in terms of their business capability.
There are a number of local banks, and many international banks have formed offshore banking units on the island and provide services to foreign or offshore companies. Business legislation created special offshore regimes for various types of business, including shipping companies, insurance companies and 'Offshore Financial Service' companies, although in 2003 most distinctions between 'offshore' and 'onshore' were abolished. There is also legislation for trusts, modelled on English trust law.
Taxation for offshore entities was very light until 2003, and Cyprus is unusual among low-tax countries in having tax treaties with more than 40 other countries. These include the former CIS and many Eastern European countries; this is why Cyprus has developed particularly close links with that region.
In 2013, the Cypriot Parliament approved an increase in the uniform corporation tax rate from 10% to 12.5%. Note, however, that it is still currently the lowest corporation tax rate in the EU (equal with Ireland.) The rate applies to both onshore and offshore companies, plus a 2% levy on wage bills (meant to subsidise pensioners), and a 'Special Contribution' related to defence which in effect applies the 12.5% corporate tax rate to inter-company dividend and interest payments. The new regime was effective from 2013.